I Introduction

Article 17 of the Chinese Anti-Monopoly Law (AML) prohibits undertakings with a dominant position in the relevant market from abusing their market dominance. According to Article 17, and subject to the rule of reason, such undertakings are banned from conducting the following seven kinds of abusive activities:

  1. selling commodities at unfairly high prices or buying commodities at unfairly low prices;
  2. without justifiable reasons, selling commodities at prices below cost;
  3. without justifiable reasons, refusing to enter into transactions with their trading counterparties;
  • without justifiable reasons, requiring trading counterparties to make transactions exclusively with themselves or with the undertakings designated by them;
  • without justifiable reasons, conducting tie-in sales of commodities or imposing other unreasonable trading conditions on transactions;
  • without justifiable reasons, applying differential prices and other transaction terms among trading counterparties on an equal footing; or
  • other acts of abuse of dominant market positions confirmed as such by the AML enforcement authorities under the State Council.

Public enforcement of the AML is carried out by three authorities: the Ministry of Commerce (MOFCOM), which is in charge of merger review; the National Development and Reform Commission (NDRC), which is responsible for combating price-related anticompetitive activities; and the State Administration for Industry and Commerce (SAIC), which regulates non-price-related anticompetitive activities.

In accordance with Article 17 of the AML, abusive activities include both price and non-price-related anticompetitive activities. For example, ‘selling commodities at unfairly high prices’ is price-related, while ‘refusing to enter into transactions with their trading counterparties’ is deemed non-price-related. The NDRC and the SAIC (and their local branches) are the two agencies in charge of antitrust enforcement against abuse of market dominance.

The NDRC, the SAIC and the Anti-Monopoly Commission of the State Council (AMC)2 have released a series of regulations and guidelines in relation to enforcing Article 17 of the AML. Since December 2015, the NDRC, the SAIC and the AMC have continued putting their efforts into drafting the AML guidelines, aiming to improve the transparency and predictability of enforcement activities regarding abuse of market dominance. In this respect, the NDRC has released the following for public opinion:

  1. Guidelines for the Abuse of Intellectual Property Rights;3
  2. Guidelines for Business Operators’ Commitments in Anti-monopoly Cases (Guidelines for Commitments);4
  3. Anti-monopoly Guidelines for Automobile Industry;5
  4. Guidelines on the General Conditions and Procedures for Monopoly Agreement Exemptions;6 and
  5. Guidelines on Recognising the Illegal Gains Obtained by Business Operators from Monopolistic Acts and Determining the Amount of Fines.7

The SAIC has also released its version of Guidelines for the Abuse of Intellectual Property Rights for public opinion,8 and the AMC released Guidelines for Abuse of Intellectual Property Rights for public opinion on 23 March 2017 by combining opinions of both the NDRC and the SAIC.9

On 17 March 2018, the Chinese National People’s Congress passed a resolution to restructure many of China’s regulatory ministries. The State Administration for Market Supervision (SAMS) will be formed in the next few months, and will take over the responsibility of ensuring the enforcement of the AML from the three existing agencies, as well as numerous other market supervision responsibilities, including those of the China Food and Drug Administration, quality control and many other SAIC functions. Although details have not been published, we hold that these arrangements will strongly affect both related laws and antitrust practices in the future.

II Year in Review

Like 2016, 2017 witnessed a lot of cases related to abuse of market dominance, especially in relation to public utility sectors.

i Public enforcement
Cases pursued by the NDRC and its provincial branches

Last year, the NDRC’s priorities related to fair competition review, while the NDRC continued to focus on enforcement in the pharmaceutical and public utility sectors. For example, the
NDRC initiated investigations into port enterprises, and required these enterprises to act consistently with the AML.10

Investigation against Zhejiang Second Pharma and Tianjin Handewei Pharmaceutical (completed)

On 28 July 2017, the NDRC imposed 443,900 yuan in cumulative fines on Zhejiang Second Pharma and Tianjin Handewei Pharmaceutical for alleged abuse of dominance in relation to isoniazid active pharmaceutical ingredients (APIs). The two companies allegedly sold isoniazid APIs at excessive prices and engaged in unjustifiable refusal to trade. The NDRC imposed a fine of 289,516 yuan, equivalent to 2 per cent of the company’s sales value in the relevant market in 2016, on Zhejiang Second Pharma, and ordered it to stop the anticompetitive practices. The NDRC imposed a fine of 154,400 yuan, equivalent to 2 per cent of the company’s sales value in the relevant market in 2016, on Tianjin Handewei Pharmaceutical, and ordered it to stop the anticompetitive practices.

Cases pursued by the SAIC and its provincial branches

Investigation against Hubei Yinxingtuo Port (completed)11

On 9 January 2018, the Hubei Administration for Industry and Commerce (AIC) imposed a penalty on Hubei Yinxingtuo Port of 977,400 yuan, equivalent to 6 per cent of the company’s sales value in 2016, for discriminating against roll-on/roll-off (RORO) shipping transport companies by favouring its connected entity, Yichang H Transport.

Investigation against the Inner Mongolia Branch of the Agricultural Bank of China’s tying practice (suspended)12

The Agricultural Bank of China’s Inner Mongolia Branch made it mandatory for all farm households seeking to take out a loan to also purchase accident insurance from it, which may violate Article 17 of the AML. The Inner Mongolia AIC launched a probe into the ABC’s Inner Mongolia Branch on 28 July 2016 after receiving SAIC authorisation. Through this investigation, the Inner Mongolia AIC found that between 7 November 2013 and 31 December 2015, the Branch was the only financial institution that provided loans to parties under the ‘Financial Poverty Alleviation and Wealth Boosting’ project in Inner Mongolia, and hence held a dominant position. In light of the commitments offered, in January 2018, the Inner Mongolia AIC decided to suspend its investigation against the ABC’s Inner Mongolia Branch in accordance with Article 45 of the AML.

Investigation against China Mobile Group Inner Mongolia Company (completed)13

In December 2017, the Inner Mongolia AIC decided to terminate an investigation into China Mobile Group Inner Mongolia Company that was based on suspicions of the imposition of unreasonable trade conditions without justified reasons. This was done in accordance with Article 45 of the AML, since China Mobile had adhered to their commitments during the preceding suspension period.

Investigation against Sichuan Jiuyuan Yinhai Software (completed)14

On 3 August 2017, the Sichuan AIC imposed 209,601 yuan, which is equivalent to 7 per cent of the company’s sales value in 2015 of the relevant software products in fines and 394,730 yuan in disgorgement, on Sichuan Jiuyuan Yinhai Software (Yinhai). The Sichuan AIC found that Yinhai provided medical insurance payment software installation services on the condition that designated agencies buy encrypted keyboards and card readers supplied by it.

Investigation against State Grid Shandong Power Company and Yantai City Muping District Power Supply Company (completed)15

In December 2016, Shandong AIC suspended an investigation against State Grid Shandong Power Company and Yantai City Muping District Power Supply Company. The companies were suspected of abusing their market dominance by appointing their affiliates as construction service companies. During the investigation, the companies admitted the illegal conduct and promised to promptly undertake internal rectification measures; Shandong AIC therefore made a suspension decision. On 30 June 2017, Shandong AIC decided to terminate the investigation in accordance with Article 45 of the AML.

Investigation against Microsoft (pending)

An investigation against Microsoft commenced in June 2014. In July 2014, the SAIC conducted large-scale dawn raids at four of Microsoft’s offices in Beijing, Shanghai, Guangzhou and Chengdu at the same time, with the cooperation of nearly 100 enforcement officers from nine SAIC branches. To date, the SAIC has publicised only limited details about the case, which is ongoing.

The major cases handled by the SAIC and its provincial branches in 2017 are summarised below:

Investigated party

Sector

Investigating authority

Conduct

Case opened

Status

Hubei Yinxingtuo Port

Transportation facility

SAIC (Hubei AIC)

Differential treatment

2017

Completed

Inner Mongolia Branch of the Agricultural Bank of China

Bank

SAIC (Inner Mongolia AIC)

Tying and imposing unreasonable trading conditions

2016

Suspended

China Mobile Group Inner Mongolia Company

Telecoms

SAIC (Inner Mongolia AIC)

Imposing unreasonable trading conditions

2014

Completed

Sichuan Jiuyuan Yinhai Software

Software

SAIC (Sichuan AIC)

Tying

2016

Completed

State Grid Shandong Power Company and Yantai City Muping District Power Supply Company

Power supply

SAIC (Shandong AIC)

Requiring trading counterparties to make transactions exclusively with the undertakings designated by them

2014

Completed

Microsoft

Software

SAIC (Guangdong AIC)

Bundling

2014

Pending

ii Private enforcement
Wu Xiaoqin (individual) v. Shaanxi Broadcast and TV Network Intermediate (Group) (completed)16

In 2012, Wu Xiaoqin, a cable TV user of Shaanxi Broadcast & TV Network Intermediary (Group) (Shaanxi Broadcast), brought a lawsuit to Xi’an Intermediate People’s Court, claiming that the company bundled chargeable cable TV programmes with basic TV services.

The Xi’an Intermediate Court supported Wu Xiaoqin’s claim that Shaanxi Broadcast abused its dominance in the local cable TV service market by tying the sale of basic services with paid services. Shaanxi Broadcast appealed, and the High People’s Court of Shaanxi Province overturned the judgment of the lower Xi’an court in September 2013.

Wu Xiaoqin filed a petition for legal review with the Supreme People’s Court, and in May 2016 the Supreme People’s Court overturned the second instance judgment of Shaanxi High People’s Court. This was the first time that an individual plaintiff won in a civil antitrust case, and the case has been announced as a guiding case by the Supreme People’s Court.

Yunnan Yingding v. Sinopec17

Sinopec and the Yunnan branch of Sinopec’s trading company were alleged to have abused their market-dominant position by refusing to incorporate biodiesel produced from waste cooking oil by Yingding, a bio-energy manufacturer, into Sinopec’s distribution system without justifiable reasons. The lawsuit was filed with the Kunming Intermediate People’s Court (Kunming Court) in Yunnan Province in January 2014.

The Kunming Court ruled against Sinopec despite not clearly addressing some issues, such as the definition of the relevant market, whether the conduct constituted refusal to deal in the sense of the AML and whether any justifiable reason existed. Sinopec was ordered to incorporate Yingding’s biodiesel within 30 days of the ruling dated 8 December 2014 in accordance with the Renewable Energy Law and the AML. Yingding and Sinopec have both appealed to the High People’s Court of Yunnan Province.

With regard to the foregoing issues, the lawyer representing Sinopec, in the second instance, pointed out that the distribution channels for biodiesel were not the same as those for petroleum products, and oil sales were not the sole channels to which biodiesel manufacturers could resort. Thus, the relevant product market in this case should be defined as the market for fatty acid methyl ester. Specifically, Sinopec itself did not produce biodiesel and therefore was not Yingding’s competitor. From this perspective, it was also hard to gauge whether the purpose of Sinopec’s refusal to purchase Yingding’s biodiesel constituted elimination or restriction of competition in the relevant market. In addition, apparent problems with the quality of the biodiesel produced by Yingding also formed a significant argument for justifiable reasons for Sinopec.

This antimonopoly lawsuit, which was the first filed against a state-owned oil company in China, attracted the attention of the whole industry. The drafter of the national standard for biodiesel blend stock for diesel engine fuels and an expert in economics were also brought in as expert witnesses to assist in clarifying the facts before the court.

On 13 August 2015, Yunnan High People’s Court reversed the first instance ruling and remanded the case on account of unclear facts and procedural errors, and the case was sent back to the Kunming Court for retrial.

The Kunming Intermediate Court held a retrial of the lawsuit in June 2016, and found that the pilot programme of switching gutter oil to biofuel had encountered challenges from an enterprise development and commercial angle. Therefore, the Court determined that the two defendants’ refusal-to-deal practice was justifiable because it was in line with their own economic benefits and the interests of consumers without bringing about any monopolistic benefits. Yunnan Yingding appealed on the grounds that fact-finding mistakes, erroneous application of the law and incorrect procedures were evident in the case.

The second instance hearing for the retrial was held on 28 April 2017. On 11 September 2017, the Yunnan High People’s Court finally issued a judgment dismissing the appeal. More specifically, the Court first clarified that, from an economic law perspective, the legal relationship between the parties was a type of private legal relationship rather than a regulated relationship. Secondly, the Court confirmed that there was in fact no lawful and effective contract between Yingding and Sinopec, since the lawyer’s letter sent by Yingding was to be merely regarded as an invitation to offer without setting out the specific and indispensable clauses and trading terms of a legal contract. In addition, the quality of the biodiesel produced by Yingding from waste oil was not certified and could not be held as meeting the relevant national standard in this area. In line with this, Sinopec therefore had no obligation to observe the rules of the Renewable Energy Law. In other words, Sinopec’s refusal to purchase the biodiesel was held not to be related to the alleged AML violation sued for in this case. Therefore, the Court supported the allegations of Sinopec by confirming that the facts of the case were clear, the law was applied correctly and no procedural errors occurred during the remanded proceedings in the court of first instance.

After receiving the final judgment, Yingding applied to the Supreme Court for a retrial. From this perspective, if Yingding succeeds, the curtain on this case will once again be lifted, but this time at a higher-level court in respect of the follow-up antimonopoly law issues remaining.

Four Chinese rare earth companies v. Hitachi Metals (pending)18

Ningbo Ketian Magnet, Ningbo Permanent Magnetics, Ningbo Tongchuang Strong Magnet Material and Ningbo Huahui Magnetic Industry, four Chinese rare earth companies, filed antitrust lawsuits against Hitachi Metals, a Japanese company, over alleged abuse of dominant position in the patent licensing market regarding rare earth magnets on 11 December 2014 with the Ningbo Intermediate People’s Court (Ningbo Court) in Zhejiang province. The rare earth companies claimed Hitachi Metals abused its market dominance and harmed industry competition by refusing to license patents to them. The patents in this case are not standard essential patents (SEPs), and are used in the manufacturing of sintered neodymium iron boron (NdFeB) magnets, a rare-earth magnet alloy widely used in parts for aeroplanes, automobiles and other products. The cases were heard in the middle of December 2015 and early in March 2017 before the Ningbo Court, and the second hearing was held on 10 March 2016 with experts of both parties being cross-examined. The final decision is pending.

It should be noted that there is no precedent holding a non-SEP to constitute an essential facility to date. This case will go down in history if the Chinese court decides that a non-SEP can be deemed an ‘essential facility’.

Qualcomm v. Meizu (completed)19

Qualcomm Inc filed a lawsuit against Meizu in the Beijing Intellectual Property Court in June 2016. The claims request rulings that the terms of a patent licence offered by Qualcomm to Meizu comply with the AML, and Qualcomm’s fair, reasonable and non-discriminatory licensing obligations. The claims also seek a ruling that the offered patent licence terms should form the basis for a patent licence with Meizu for Qualcomm’s fundamental technologies patented in China for use in mobile devices, including those relating to 3G (WCDMA and CDMA2000) and 4G (LTE) wireless communications standards. Although this lawsuit has attracted the interest of various groups and touches on leading issues in China’s antitrust enforcement history, the two parties reached a settlement at the end of December 2016.

Apple v. Qualcomm20

Apple Inc’s China subsidiary has filed two lawsuits against Qualcomm Inc in China, according to the Beijing Intellectual Property Court’s Chinese-language WeChat account. On 25 January 2017, Apple Electronics Products Commerce (Beijing) Co, Ltd filed a lawsuit alleging that Qualcomm abused its dominance in the sale of baseband processor chipsets. The Apple subsidiary is seeking 1 billion yuan in damages. Apple Electronics has also filed a second lawsuit, alleging Qualcomm refused to license its SEPs to Apple on fair, reasonable and non-discriminatory (FRAND) terms.

In summary, the most high-profile litigations of 2016 to 2018 are listed below:

Plaintiff

Defendant

Sector

Courts

Conduct

Case opened

Result

Wu Xiaoqin (Individual)

Shaanxi Broadcast and TV Network Intermediate (Group)

TV services

The Xi’an Intermediate Court; the High People’s Court of Shaanxi province; the Supreme People’s Court

Tying

2012

Completed

Yingding

Sinopec

Bio-energy

Kunming Intermediate People’s Court; Yunnan High People’s Court

Refusal to deal

2014

The plaintiff appealed to the High People’s Court of Yunnan Province and applied to the Supreme Court for a retrial.

However, the Supreme Court has not decided whether to dismiss the application or to enter the retrial procedure

Four Chinese rare earth companies

Hitachi Metals

Rare earth magnets

Ningbo Intermediate People’s Court

Refusal to deal

2014

Pending

Qualcomm

Meizu

Baseband processor chipsets

Beijing IP Court

Selling at unfairly high prices

2016

Completed

Apple Electronics

Qualcomm

Baseband processor chipsets

Beijing IP Court

Refusal to license on FRAND terms

2017

Pending

III RELEVANT MARKET DEFINITION AND MARKET POWER

The approaches for defining the relevant market and assessing market power presented in the black letter law of China are consistent with other major antitrust regimes.

i Relevant market definition

The basic principles related to abuse of dominance in the AML are similar to those of Article 102 of the Treaty on the Functioning of the European Union and Section 2 of the Sherman Act. The specification of market definition is stipulated in the Guidelines on the Definition of Relevant Market (Guidelines). In accordance with the Guidelines, the basic approaches for defining the relevant market are analysis of demand-side substitutability and supply-side substitutability.

Article 8 of the Guidelines provides that the following factors may be considered when defining the relevant market from the demand side:

  • a evidence of turning to other products when the price or other factors of the product concerned are changed;
  • b the appearance, characteristics, quality, technical features and functionality of the product;
  • c price variance between products;
  • d the distribution channel; and
  • e other factors.

Article 9 of the Guidelines provides the following factors to be considered when defining the relevant geographical market from the demand side:

  1. evidence of turning to other regional products when the price or other factors of the product concerned are changed;
  2. the transportation cost and the characteristics of transportation;
  3. the region in which the majority of the demanders purchase the product in practice, and the regional distribution of major business operators’ products;
  4. trade barriers such as tariffs, regulations, and environmental and technical factors; and
  5. other factors.

The Guidelines also mention the ‘small but significant and non-transitory increase in price’ method (the SSNIP test, or hypothetical monopolist test), a tool frequently used by both EU and US antitrust regulators.

ii Market dominance

Market dominance under the Chinese antitrust regime is defined in Article 17 of the AML and further clarified by the implementing rules. It refers to a market dominant position held by one or more undertakings that enable the undertakings to:

  1. control the price, volume or other trading terms21 in the relevant market; and
  2. block or affect the ability of other undertakings to enter the relevant market by impeding or delaying other undertakings’ entry into the market, or substantially increasing other undertakings’ entry costs, so that the competitors cannot compete effectively post-entry.
iii Market share presumption

As illustrated in the table below, Article 19 of the AML specifies the market-share thresholds that are regarded as preliminary evidence of market dominance:

Number of undertakings

Aggregated market share in the relevant market

One

One-half

Two

Two-thirds

Three

Three-quarters

The preliminary evidence of market dominance can be rebutted by proof showing lack of sufficient market power despite high market share.22 In addition, under the preliminary evidence, if any of the undertakings has a market share of less than 10 per cent, this undertaking shall not be deemed to have a dominant position.23

iv Factors for assessment of dominance

The AML has further elaborated the factors by which market dominance should be assessed in Article 18, including:

  1. market share in the relevant market;
  2. the competition situation in the relevant market;
  3. the ability to control sales markets or raw material purchasing markets;
  4. the financial status and technical conditions of undertakings;
  5. the degree of dependence of other undertakings;
  6. entry to relevant market by other undertakings; and
  7. other factors related to finding a dominant market position.

IV Abuse

i Overview

Article 17 of the AML sets out a non-exhaustive list of seven types of behaviour that may be regarded as abuse of market dominance:

  • a excessive pricing, or selling at an unfairly low price;
  • b selling below cost;
  • c refusal to deal;
  • d requiring a party to trade exclusively with the undertaking or other designated undertakings;
  • e tie-ins or the imposition of other unreasonable trading terms;
  • f price discrimination or the imposition of other discriminatory trading terms; and
  • g other behaviours defined as abuse of dominance by the antitrust regulators.

As early as 2015, the enforcement priority of the SAIC gradually shifted from monopoly agreements to abuse of dominance. In particular, practices including excessive pricing, tying and discriminatory treatment by public utility companies have frequently come under antitrust scrutiny. In 2017, the enforcement agencies continue to focus on the pharmaceutical and public utility sectors: for example, the NDRC initiated investigations into port enterprises, and required these enterprises to act consistently with the provisions of the AML.24

ii Exclusionary abuses

‘Exclusionary abuses’ means the dominant undertaking abuses its market dominance by excluding its competitors, for example, by selling below cost, refusing to deal, or tying or bundling.

Concluded cases suggest that both the SAIC and the NDRC have an interest in exclusionary abuses. Exclusionary abuses are included in the NDRC’s investigations into the port enterprises. Such abuses include restricting logistics firms from using tugboat, tally and shipping agency services from any party other than the subsidiaries of the operators, charging excessive international transhipment container handling fees and imposing unfair terms on transaction counterparts, such as terms related to no competition, unpacking tally and customer loyalty.

Inner Mongolia AIC’s investigations into the Inner Mongolia Branch of the Agricultural Bank of China and China Mobile Group Inner Mongolia Company focus on abuses of tying and imposing unreasonable conditions. In Sichuan AIC’s investigation into Sichuan Jiuyuan Yinhai Software, the company conducted tying behaviour. In Shandong AIC’s investigation on State Grid Shandong Power Company and Yantai City Muping District Power Supply Company, the companies required trading counterparties to make transactions exclusively with the undertakings designated by them.

iii Discrimination (including discriminatory pricing)

The Hubei AIC’s investigation into Hubei Yinxingtuo Port focuses on discriminatory treatment. On 9 January 2018, the Hubei AIC imposed a penalty on Hubei Yinxingtuo Port of 977,400 yuan, equivalent to 6 per cent of the company’s sales value in 2016, for discriminating against RORO shipping transport companies by favouring its connected entity, Yichang H Transport.

iv Exploitative abuses (including excessive pricing)

‘Exploitative abuses’ means that a dominant undertaking abuses its position by exploiting its customers or suppliers, for example, by selling at an unfairly high price.

In 28 July 2017, NDRC imposed 443,900 yuan in cumulative fines, equivalent to 2 per cent of the companies’ sales value in the relevant market in 2016, on Zhejiang Second Pharma and Tianjin Handewei Pharmaceutical, for alleged abuse of dominance in relation to isoniazid APIs. Two companies allegedly sold isoniazid APIs at excessive prices and engaged in unjustifiable refusal to trade. This demonstrates the antitrust enforcement agencies’ willingness and capacity to deal with exploitative abuse behaviours.

V Remedies and Sanctions

i Sanctions

In accordance with Article 47 of the AML, an undertaking that has abused its dominant position may be fined between 1 and 10 per cent of its turnover in the preceding year. In addition, the regulator may confiscate its illegal gains. Article 49 of the AML further states that when calculating the amount of the fine, the regulator shall consider factors such as the nature, gravity and duration of the illegal conduct. As mentioned in Section I, the NDRC has already released a draft Guideline on Fines,25 which further explains the key points regarding imposing fines and confiscation of illegal gains.

ii Behavioural remedies (including interim measures)

Along with sanctions, Article 47 of the AML provides that the regulator may impose cease-and-desist orders to stop illegal abusive conduct, but there is no explicit legal basis regarding whether and how the regulator may impose such interim measures for abusive conduct. Previous cases provide little clarification in this regard, owing to their lack of transparency.

iii Structural remedies

To date, there are no effective antitrust-related laws, regulations or rules in China explicitly authorising the SAIC or NDRC to impose structural remedies on undertakings for violation of Article 17 of the AML. Accordingly, all previous cases suggest that the regulators do not adopt structural remedies for abuse of dominance.

However, Article 45 of the AML does not delineate the scope of the commitment that the undertakings under investigation may make, so it remains to be seen whether a dominance investigation can be closed on the basis of structural commitments. As mentioned above, on 2 February 2016, the NDRC posted a notice on its official website soliciting opinions for the Guideline for Commitments, which aims to clarify the scope of possible commitments to be borne by undertakings.

VI Procedure

Although the SAIC and the NDRC have their own respective procedural rules, they are consistent with each other. The stages of SAIC and NDRC investigations are as follows:

a An antitrust investigation can be triggered largely from four possible sources:

• reports;

• transference from other government agencies;

ex officio discovery; and

• assignment by superior entities. 

  1. b The SAIC delegates antitrust enforcement to its provincial branches on a case-by-case basis, while the NDRC grants a general authorisation to local branches. The two authorities still maintain control at central government level for cases that carry a potentially nationwide impact.
  • c It falls within the regulators’ discretion to determine whether to open a formal investigation after receiving a lead.
  • d Investigative measures include:

• conducting an inspection by entering business premises or another relevant place;

• interviewing business operators under investigation, interested parties or other relevant entities or individuals;

• checking and duplicating, inter alia, relevant documents, agreements, account books, business correspondence and electronic data for the business operators under investigation, interested parties, and other relevant entities or individuals;

• seizing and detaining relevant evidence; and

• checking the bank accounts of the business operators under investigation.

  • e Undertakings under investigation can offer commitments at any stage of an investigation. The regulators are entitled to decide whether to accept the commitments.
  • f The regulators may issue an exemption when the undertaking concerned fulfils the conditions set out by Article 15 of the AML. The authorities may also issue punishment decisions when they consider that the undertaking concerned has violated Article 17 of the AML. The regulators may publish the decisions, but are not obliged to do so.
  • g If unsatisfied with a decision, the undertakings under investigation may apply for an administrative review or file an administrative lawsuit with a court for judicial review.

The SAIC and the NDRC’s investigations vary significantly in terms of duration, and no statutory deadlines apply. Therefore, investigations may last for years, such as they did in, for example, the Tetra Pak and Microsoft cases.

VII FUTURE DEVELOPMENTS

The most significant landmark in 2018 is the merger of the antitrust enforcement agencies. The People’s Congress passed the ‘Institutional Reform Programme’, which aims to merge the three antitrust agencies into one agency under the State Administration for Market Regulation (SAMR), on 17 March. After four days, Zhang Mao, the former Director-General of the SAIC, was nominated as the new director of SAMR.

The newly formed SAMR was officially listed on 10 April 2018. The antitrust agencies under NDRC and MOFCOM moved to SAMR respectively on 8 May and 10 May, and the antitrust activities of the previous agencies have resumed as normal under SAMR. For example, SAMR has been accepting merger control filings since 14 May 2018 following a pause on 10 and 11 May. For now however, the number of bureaux to be set up, along with their related divisions and leaders, are still under discussion, and probably will be finalised and published sometime in early July.

Considering that the AML’s enforcement power has always been vested mainly with the state and provincial-level (by authorisation from the former) government agencies, the phased implementation may have less implications on the reform of the AML enforcement agencies, which is to say that implementation of the reform in terms of AML enforcement will be seen in phase one.

The merger will likely improve the stability of the AML enforcement agency, and foster certainty and consistency of AML-related practices and rules in China. As such, businesses will be afforded with an improved level of certainty regarding how to work out their compliance efforts.

Under the new unified agency model, previous confusion about whether a specific conduct (such as offering loyalty rebates) falls within the price violation category or the non-price violation category will disappear. This will expedite the handling of and responses to AML-related complaints on the part of the regulator.

In the long run, the unnecessary inconsistency among different sets of rules issued by three parallel agencies on one issue might also disappear. The effectiveness of the regulations and soft laws published or in contemplation by each of the three agencies, or through joint efforts between them, is unclear at this stage. In this respect, a key question is how to harmonise inconsistencies among the rules and practices relating to the application of leniency and sanctions, and of the ‘safe harbour’ that has been contemplated in the draft guidelines to be applicable to the motor vehicle industry and intellectual property rights.

There will be several issues worth close observation, including:

  1. the way in which AML enforcement activities will be carried out procedurally by the new agency;
  2. the way in which the existing regulations and soft laws will be applied in cases after the merger;
  3. the enforcement priorities of the new agency;
  4. the head of the new agency; and
  5. the style that the new agency will adopt.

1 Zhan Hao is the managing partner and Song Ying and Stephanie Wu are partners with AnJie Law Firm.

2 In accordance with Article 9 of the AML, the State Council shall establish an antimonopoly commission in charge of organising, coordinating and guiding antimonopoly work and performing the following duties: (1) studying and drafting policies on competition; (2) organising studies and assessments of competition in the market as a whole and publishing assessment reports; (3) formulating and releasing antimonopoly guidelines; (4) coordinating administrative enforcement of the AML; and (5) other duties as prescribed by the State Council.

9 http://fldj.mofcom.gov.cn/article/zcfb/201703/20170302539418.shtml.

12 http://www.saic.gov.cn/fldyfbzdjz/jzzfgg/201802/P020180208513840471350.pdf.

16 http://wenshu.court.gov.cn/content/content?DocID=2a673a72-5b62-4857-ae42-c8b835b0c096&KeyWord=%E5%8F%8D%E5%9E%84%E6%96%AD%E6%B3%95.

17 See this case at http://cnews.chinadaily.com.cn/2014-12/19/content_19129117.htm, and http://finance.chinanews.com/ny/2015/04-22/7227129.shtml.

19 See this case at www.qualcomm.cn/news/releases-2016-06-23, and http://tech.qq.com/a/20161230/
022944.htm.

20 http://mp.weixin.qq.com/s/T-7Sluv4E6jldsBgIaiKrw.

21 According to Article 17 of the Provisions of Anti-Price Monopoly, ‘other trading terms’ include the factors that can have substantial impact on a market, such as grade of commodity, payment terms, method of delivery, aftersales service, trading options or technical constraints.

22 See Article 19 of the AML.

23 Ibid.